United States: Hospital Not Vicariously Liable For Acts Of Employees Of Unrelated, Independent Clinic Under Apparent Agency Theory

Last Updated: April 24 2018
Article by Melinda S. Kollross

In a split decision, the Illinois Supreme Court holds that a hospital could not be held vicariously liable under the doctrine of apparent agency for the acts of the employees of an unrelated, independent clinic that was not a party to the litigation. Yarbrough v. Northwestern Memorial Hospital, 2017 IL 121367.

Facts

Plaintiff obtained prenatal medical care at Erie Family Health Clinic, a federally-funded, non-profit clinic. She was told she would receive some prenatal care at Northwestern Memorial Hospital ("NMH") and would deliver her baby there. Erie-employed physicians seeking privileges to practice at NMH are required to apply for them, as would any physician.

After some initial complications, Plaintiff obtained an emergency ultrasound at another hospital, which revealed that she had uterine and cervical issues. A follow-up ultrasound was performed at Erie, which revealed only the cervical issue. A 20-week ultrasound was performed at NMH. Plaintiff then gave birth at 26 weeks. Among others, she sued NMH, alleging that Erie was its apparent agent, and Erie rendered negligent prenatal care for failing to detect and treat her uterine and cervical conditions, which caused her preterm delivery. She asserted several allegations of close ties between Erie and NMH to support the apparent agency claim. She did not sue Erie.

NMH moved for partial summary judgment, arguing that it had no control over Erie or its employees, did not provide any financial or operational support to Erie, and did not otherwise hold Erie out as its agent. The circuit court sua sponte certified a question under Supreme Court Rule 308 regarding whether NMH could be held vicariously liable under an apparent agency theory "for the acts of the employees of an unrelated, independent clinic that is not a party to the present litigation."

The First District Appellate Court answered "yes." It initially noted that a hospital can be vicariously liable for the acts of independent contractor physicians, even where the conduct occurred at an affiliated clinic outside of the four walls of the hospital. It concluded that the key inquiry is whether the hospital and/or clinic held themselves out as having such close ties that a reasonable person could conclude that an agency relationship existed, and whether the plaintiff relied on the hospital for treatment, rather than any particular physician. It further held that there was no requirement that the apparent agent also be named as a defendant.

NMH filed a petition for leave to appeal arguing that the First District greatly expanded the scope of the apparent agency doctrine, in contravention of prior Illinois Supreme Court precedent, creating liability for a hospital for all acts of any physician with hospital privileges.

Analysis

The Illinois Supreme Court granted review and reversed the Appellate Court in a 4-3 opinion authored by Justice Theis (Chief Justice Karmeier and Justices Thomas and Garman, concurring). The certified question before the Court asked:

Can a hospital be held vicariously liable under the doctrine of apparent agency set forth in Gilbert v. Sycamore Mun. Hosp., 156 Ill.2d 511, 622 N.F.2d 788, 190 Ill. Dec. 758 ([1993]), and its progeny for the acts of the employees of an unrelated, independent clinic that is not a party to the present litigation?

In Gilbert, the Illinois Supreme Court held that a hospital may be found vicariously liable under the doctrine of apparent authority for the negligent acts of a physician providing care at a hospital, regardless of whether the physician is an independent contractor, unless the patient knows or should have known that the physician is an independent contractor. Gilbert sets forth the following three elements for a hospital to be liable under the doctrine of apparent authority: (1) plaintiff must show that the hospital, or its agent, acted in a manner that would lead a reasonable person to conclude that the individual who was alleged to be negligent was an employee or agent of the hospital; (2) where the acts of the agent create the appearance of authority, the plaintiff must also prove that the hospital had knowledge of and acquiesced in them; and (3) the plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent with ordinary care and prudence.

The Court revisited the issue of apparent authority in the medical malpractice context in Petrovich v. Share Health Plan of Illinois, 188 Ill. 2d 17 (1999), wherein plaintiff alleged that an HMO was vicariously liable for the conduct of the participating physicians who treated her. Following its rationale in Gilbert, the Court held that to establish apparent authority against an HMO for physician malpractice, the patient must prove (1) that the HMO held itself out as the provider of health care, without informing the patient that the care is given by independent contractors, and (2) that the patient justifiably relied upon the conduct of the HMO by looking to the HMO to provide health care services rather than looking to a specific physician.

The Court's most recent statements on apparent authority in the area of medical malpractice come in York v. Rush-Presbyterian-St. Luke's Medical Center, 222 Ill. 2d 147 (2006). In York, the plaintiffs filed a medical malpractice action against the at tending anesthesiologist who was employed by University Anesthesiologists, S.C., and added Rush as a defendant on the theory that the anesthesiologist was Rush's apparent agent. The Court found that the York plaintiff presented sufficient evidence of apparent authority to support the jury's verdict finding Rush vicariously liable for the malpractice of the anesthesiologist, and affirmed the trial court's denial of Rush's motion for judgment notwithstanding the verdict. The York Court discussed in detail what it termed the "realities of modern hospital care" and concluded that "the fervent competition between hospitals to attract patients, combined with the reasonable expectations of the public that the care providers they encounter in a hospital are also hospital employees, raised serious public policy issues with respect to a hospital's liability for the negligent actions of an independent-contractor physician."

Turning to the present case, the Court found the question before it does not implicate the policy considerations that informed its decision in Gilbert and later holdings in Petrovich and York. Those cases sought to protect a patient who is unaware that the individual providing him or her medical treatment is not an employee or agent of the hospital or HMO from whom treatment is sought. Under such circumstances, the Court found a patient should have the right to look to the hospital or HMO in seeking compensation for any negligent care.

Here, by contrast, plaintiff "sought treatment at Erie but looks to impose liability on NMH." Erie is neither owned nor operated by NMH. While Erie receives some charitable financial and technical assistance from NMH, Erie is an FQHC that relies heavily on federal grants and Medicaid reimbursement to provide underserved communities with primary and preventative care regardless of an individual's ability to pay. Erie's employees are considered federal employees, and suits against Erie or its employees can only be maintained under the Federal Tort Claims Act. Erie does not utilize the Northwestern name. There is no Northwestern-related branding or the use of Northwestern's trademark purple color by Erie.

The Court distinguished these facts from the Malanowski case cited by Plaintiff, wherein Loyola owned and operated the subject outpatient center which allegedly bore the "Loyola" name, the outpatient center held itself out as a direct provider of health care services, the outpatient center introduced the decedent to her physician, and the payment for services provided by the physician was made directly to the outpatient center. Malanowski v. Jabamoni, 293 Ill. App. 3d 720 (1997).

The Court recognized that physicians employed by Erie routinely have privileges to practice at NMH. However, they must apply for such privileges as would any doctor. The Court explained: "Gilbert was informed by our concern with the reasonable expectations of the public that the care providers that they encounter in a hospital are also hospital employees . . . Gilbert does not suggest that merely granting a physician employed by another entity hospital staff privileges alone could create an apparent agency relationship." The Court accordingly refused to read Gilbert and its progeny "so broadly as to impose vicarious liability under the doctrine of apparent authority on a hospital for the care given by employees of an unrelated, independently owned and operated clinic like Erie."

Justice Burke authored a lengthy dissent, in which she was joined by Justices Freeman and Kilbride. Justice Burke stated "[t]he appellate court did a thorough analysis of the Gilbert elements and explained why there remain questions of fact sufficient to preclude the entry of summary judgment. I find this analysis persuasive and would adopt it herein."

Learning Point: A hospital cannot be held vicariously liable under the doctrine of apparent agency for treatment rendered at and by employees of an unrelated, independently owned and operated clinic which did not use the hospital's name or branding; the mere fact that some physician employees of the clinic also had staff privileges at the hospital is insufficient to establish liability under Gilbert and its progeny.

Copyright 2018 Clausen Miller P.C. Reprinted with permission

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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